Repairing broken relationships

We were appointed in 2016 to the UK Scheme of a global technology and manufacturing business. At the time it looked highly likely that the Scheme would enter the PPF assessment process and the Trustee advisers were recommending approaching the Pensions Regulator to use its moral hazard powers. The Sponsor is a well-known brand and was keen to explore all available options in respect of the Scheme.

We agreed that the ultimate outcome sought by all parties was the buyout of the Scheme liabilities by an insurance company. As such, we worked with the sponsor to construct an alternative approach which would lead to a better outcome for all parties.

The first step required some hard work and careful stakeholder management to repair the existing, badly broken, relationships. We recognised that getting all parties back around the table and talking again was a fundamental requirement if progress was to be made.

Solution

Part one of the solution required agreement to a large scale and generous set of liability management exercises with the Sponsor and their advisers. Linked to these exercised, contingent payments were to be made to the Scheme by the Sponsor if the exercises were successful.

Part two involved the innovative implementation of a reservoir trust, which materially helped to reduce the estimated buy-out cost. Together with an affordable but significant cash injection from sponsor, the Scheme will now be able to buyout all benefits in full – a great outcome for the members.